It started, Kellie Jayne Brown remembers, with a question from a neighbour: what do you think your house is worth? Brown had her answer ready. What she was not ready for, though, was her neighbour's reaction: stunned disbelief. "Her mouth dropped to the floor," says Brown.

This was how Brown, a single, unemployed mother of three, discovered she had paid way too much for her dream home in country Victoria.

This was also the conversation that launched her on a legal test case that could have implications for state laws and for hundreds, if not thousands, of other Victorians, including the controversial multi-million-dollar Cellante family, which claims to be the dominant player in real estate in country Victoria.

The civil case in Horsham Magistrates Court is being pursued by the director of Consumer Affairs Victoria, David Cousins. Government and consumer groups see the case as a crucial step in efforts to regulate real estate deals, some of which leave home buyers crippled by huge interest payments on houses for which they are dramatically overcharged.

Consumer Affairs Minister John Lenders recently referred to the legal action as a test case that could lead to further prosecutions. He suggested its outcome might also indicate whether the Fair Trading Act should be amended to outlaw schemes that exploit people in property deals, or where unconscionable conduct can be proved.

The case cites as defendants Astvilla Pty Ltd, Perna Pty Ltd and Livio Cellante, an officer of Perna and of Astvilla, which is the registered owner of another company, Vic Properties.

Cellante refused to discuss the legal action with The Age because it was before the court, which is believed this week to have ordered the Cellante side to submit a new defence in the case. Brown also declined to go into detail before the hearing.

The suit claims Livio Cellante and two companies with which he is associated engaged in unconscionable, misleading and deceptive conduct under the Fair Trading Act because of the way they dealt with Brown. They are alleged to have taken advantage of Brown when they sold her a house in Warracknabeal (for more than double what they paid for it) when the Cellante company did not own it at the time of the sale.

The saga began, according to the complaint before the court, in June 2001. Brown viewed the Vic Properties internet site, which claimed the company could organise bank finance or vendor terms for properties that could be secured for as little as $250 deposit and $50 a week.

Brown's first contacts included Jeanette Porto and Luke Wissell, who worked with Perna and Astvilla. Brown allegedly told them she was not working, was on a government pension and was struggling to pay her rent of $200 a week. She wanted to pay no more than $130 a week to buy a property.

Brown eventually decided on the Warracknabeal house, which Wissell said would cost $55,000 under vendor terms but $53,000 for early settlement. He allegedly said the house had just come on the market and would be in demand and that he could sell it five times over at that price. Brown bought the house on signing a contract note and later a terms contract. A friend paid the $1000 deposit to the Cellante company with his credit card.

The complaint before the court alleges Brown was also told the property was in good condition and that the price was fair and reasonable. Wissell allegedly suggested she sign up that day to secure it. Cellante is alleged to have made a similar claim. Later, Brown was allegedly told by Porto the property did not have any easements attached to it.

But Consumer Affairs says the house was not in demand, as it had been on the market for four years for an asking price of $32,000; the roof required replacement or repair; the building needed restumping; and the land had sewerage and drainage easements.

Consumer Affairs says that implicit in claims to Brown was that Vic Properties was the owner, the registered proprietor or entitled to be registered as proprietors and that it was entitled to sell the house.

But Consumer Affairs says these circumstances did not apply when Brown entered into the contract and that, at that time, the registered proprietor was a Warren Taylor.

The suit also alleges Brown was denied the chance to acquaint herself with the prices of comparative properties in the Warracknabeal area because Wissell and Cellante suggested she should sign up immediately or she might lose the property.

The court is being asked to issue injunctions against Cellante and the companies to discontinue several business practices and to order the repayment of $32,000 to Brown - the difference between the $25,600 the Cellante company allegedly paid for the house and the $58,000 they charged her.

The Reserve Bank of Australia has estimated that 300 companies have sprung up in the past three years offering high-interest vendor finance on houses to people who cannot get loans from traditional lending institutions. The Reserve warned that buyers stood to lose their houses, their first home owners' deposit and any repayments they had made if they defaulted on loans.

The State Government is certainly concerned at the potential damage. Said Lenders, in his comments before the case began: "We are alarmed by the number of low-income and vulnerable consumers having their dream of owning their first home turn into a nightmare."